Ready Capital to buy $60m Irish loan portfolio
New York-listed company expected to use Ireland as a launch pad into Europe, writes Sean Pollock
READY Capital Corporation, a New York Stock Exchange-listed real estate finance company, is entering the Irish market, after it announced it would acquire a $60m (€54.4m) portfolio of loans here.
The finance company, which focuses on originating, acquiring and servicing small to medium-sized balance commercial loans, plans to enter the Irish market and then look at opportunities in other European countries.
The loans acquired by Ready Capital are transitional balance commercial real estate ones, which are typically less than $5m. Its new portfolio in Ireland is expected to grow, with a $100m annual flow agreement.
Earlier this month, Thomas Capasse, chairman and chief executive of Ready Capital, revealed the acquisition of the loans during a third-quarter earnings call with analysts.
He said: “Our entry into the European small-balance commercial markets will commence with the purchase of a $60m loan portfolio of transitional loans located in Ireland, which is projected to close in the next two weeks and includes a forward flow agreement expected to generate up to $100m annually.”
Scott Valentin, an analyst with investment bank Compass Point Research and Trading, asked Capasse for more details about the move into Ireland. Capasse said its external manager, Waterfall Asset Management, already had a presence in Europe and Ireland.
He added that he considered the Irish market as strong, and that the company had seen the emergence of a market for “purchasing homes or smaller commercial properties for repositioning and rental”.
On the initial set-up in Ireland, Capasse said Ready Capital would buy the portfolio and then “set up a floor arrangement, which would be financed through term bank lines of credit”.
He described the risk and reward metrics here as “relatively strong”.
“In terms of guidance on percentage of NAV [net asset value], we look [at] the European opportunity right now as probably a slightly higher ROE [return on equity] than here in the US, maybe a couple of hundred, 100, 200 basis points,” said Capasse. “We’d look to maybe allocate over time 10pc of our NAV to Europe to start.”
In Ready Capital’s third-quarter earnings report, the company announced it had core earnings of $18.2m. It originated $465.4m and acquired $77.9m of small-balance commercial loans, which was below the expectations of analysts at Compass Point. The firm also originated $656.8m of residential mortgage loans.
Ahead of the results, Ready Capital completed the acquisition of Knight Capital, a working capital provider to small businesses in the US. According to Compass Point, the deal was worth $27.8m.
The firm’s external manager, Waterfall, also manages other investment pools. In 2018, Future Finance, an Irish student loan specialist, signed a €114m debt facility with Waterfall.